Protectionism threatens Mexican economy – IMF

MEXICO CITY: Protectionism from abroad threatens Mexico’s economy, but it is too early to say whether Donald Trump’s presidency will affect growth, the International Monetary Fund said Tuesday.

After posting 2.5 percent economic growth in 2015, Latin America’s second-biggest economy after Brazil is projected to slow to 2.1 percent this year, the IMF said in a report, leaving its previous forecast unchanged.

The IMF slightly lowered Mexico’s outlook for 2017, predicting the economy will grow by 2.2 percent in 2017, a 0.1 percentage point lower than previously thought.

“Mexico continues to grow at a moderate pace despite a challenging external environment,” the IMF said in an annual report.

“However, the country remains exposed to external shocks, including risks of growing protectionism, given its strong financial and trade linkages with the rest of the world,” the report said.

The staff report, which was completed four days before the November 8 US election, did not directly mention
Trump. The Republican US president-elect wants to renegotiate the North American Free Trade Agreement (NAFTA) and threatens to impose tariffs to prevent US firms from outsourcing to Mexico.

IMF officials said they must wait and see which policies Trump’s administration will adopt before the Washington-based institution can revise its forecast for the Mexican economy.

“We need to base our projection of actual policies that will be adopted,” Robert Rennhack, deputy director of the IMF’s Western Hemisphere department, told reporters.

“We need to wait and see what the new administration will actually do. Lots of thing are said in the campaign, and I think it is important to avoid overreacting to those,” he said.

The Mexican peso was rocked by Trump’s victory in the US presidential election, depreciating by about 14 between November 8 and November 11 on fears that Trump will fulfill his protectionist policies.

In addition to renegotiating the 22-year-old NAFTA pact with Mexico and Canada, Trump, who takes office on January 20, announced Monday that his administration will withdraw from the 12-nation Trans-Pacific Partnership trade deal.